Investment and Mortgage-Backed Securities, Available For Sale

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of investment and mortgage-backed securities available for sale are as follows:



	March 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	8,983,672	$	48,214	$	18,189	$	9,013,697
Small Business Administration (“SBA”) Bonds	93,589,413		2,514,953		204,158		95,900,208
Tax Exempt Municipal Bonds	49,806,615		1,408,452		268,729		50,946,338
Mortgage-Backed Securities	192,792,978		6,799,757		145,367		199,447,368
Equity Securities	102,938		—		9,188		93,750
	$	345,275,616	$	10,771,376	$	645,631	$	355,401,361
	December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	6,115,036	$	53,954	$	4,320	$	6,164,670
SBA Bonds	94,152,203		2,466,354		156,287		96,462,270
Tax Exempt Municipal Bonds	35,772,115		1,770,567		60,534		37,482,148
Mortgage-Backed Securities	206,793,861		8,030,008		91,966		214,731,903
Equity Securities	102,938		—		27,713		75,225
	$	342,936,153	$	12,320,883	$	340,820	$	354,916,216

FHLB securities, and FNMA and FHLMC mortgage-backed securities are issued by government-sponsored enterprises (“GSEs”). GSEs are not backed by the full faith and credit of the United States government. SBA bonds are backed by the full faith and credit of the United States government. Included in the tables above and below in mortgage-backed securities are GNMA mortgage-backed securities, which are also backed by the full faith and credit of the United States government. At March 31, 2013 and December 31, 2012, the Bank held an amortized cost and fair value of $118.7 million and $123.5 million, respectively, and $135.3 million and $141.2 million, respectively, in GNMA mortgage-backed securities included in mortgage-backed securities listed above. All mortgage-backed securities above are either GSEs or GNMA mortgage-backed securities. The Company has not invested in any private label mortgage-backed securities.

The amortized cost and fair value of investment and mortgage-backed securities available for sale at March 31, 2013 are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without call or prepayment penalties.



	Amortized Cost		Fair Value
Less Than One Year	$	—	$	—
One – Five Years	15,540,739		15,932,338
Over Five – Ten Years	61,815,281		63,170,489
More Than Ten Years	75,126,618		76,851,166
Mortgage-Backed Securities	192,792,978		199,447,368
	$	345,275,616	$	355,401,361

7. Investment and Mortgage-Backed Securities, Available For Sale, Continued

At March 31, 2013 and December 31, 2012, the amortized cost and fair value of investment and mortgage-backed securities available for sale pledged as collateral for certain deposit accounts, FHLB advances and other borrowings were $103.7 million and $108.7 million, respectively, and $108.9 million $114.4 million, respectively.

The Bank received $20.9 million and $13.5 million, respectively, in proceeds from sales of available for sale securities during the three months ended March 31, 2013 and 2012. As a result, the Bank recognized $384,000 and $535,000, respectively, in gross gains and no gross losses for the three months ended March 31, 2013 and 2012.

The following tables show gross unrealized losses and fair value, aggregated by investment category, and length of time that individual available for sale securities have been in a continuous unrealized loss position ate the dates indicated.



	March 31, 2013
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	5,979,820	$	18,189	$	—	$	—	$	5,979,820	$	18,189
SBA Bonds	6,440,340		170,489		1,716,490		33,669		8,156,830		204,158
Tax Exempt Municipal Bond	16,952,240		268,729		—		—		16,952,240		268,729
Mortgage-Backed Securities	19,458,520		145,367		—		—		19,458,520		145,367
Equity Securities	—		—		93,750		9,188		93,750		9,188
	$	48,830,920	$	602,774	$	1,810,240	$	42,857	$	50,641,160	$	645,631



	December 31, 2012
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	995,680	$	4,320	$	—	$	—	$	995,680	$	4,320
SBA Bonds	4,583,177		119,825		1,833,076		36,462		6,416,253		156,287
Tax Exempt Municipal Bond	4,538,734		60,534		—		—		4,538,734		60,534
Mortgage-Backed Securities	16,259,037		91,966		—		—		16,259,037		91,966
Equity Securities	—		—		75,225		27,713		75,225		27,713
	$	26,376,628	$	276,645	$	1,908,301	$	64,175	$	28,284,929	$	340,820

Securities classified as available-for-sale are recorded at fair market value. At March 31, 2013 and December 31, 2012, 6.6% and 18.8% of the unrealized losses, respectively, or two individual securities, consisted of securities in a continuous loss position for 12 months or more. The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature. The Company believes, based on industry analyst reports and credit ratings, that the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary. The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether there is any indication of other-than-temporary impairment (“OTTI”). Factors considered in the review include estimated future cash flows, length of time and extent to which market value has been less than cost, the financial condition and near term prospects of the issuer, and our intent and ability to retain the security to allow for an anticipated recovery in market value.

7. Investment and Mortgage-Backed Securities, Available For Sale, Continued

If the review determines that there is OTTI, then an impairment loss is recognized in earnings equal to the entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made, or we may recognize a portion in other comprehensive income. The fair value of investments on which OTTI is recognized then becomes the new cost basis of the investment.